Cost of fuel

[Gwizz]

What spurred this comment:

The news said one of our US Oil companies made more profit in the second quarter of this year than any other corporation in the world.  Whatever that means. Only oil companies or all companies.

I keep wondering who is really to blame for the fast moving and huge increase in the cost of fuels.

I know world demand in increasing.  But that is something that could have been planned for.

Our mostly democratic congress just went on their summer vacation without passing any corrective bill.  Some say it is their regulations that has not allowed big oil to continue US development. We have a huge amount of untapped oil.

Some say don't blame the oil companies, but they are generating absurd profits.

Some say to nationalize the oil industries;  But will that reduce the excess taxes on oil or reduce the regulations that stopped their developments or will this reduce prices?

Is it really impossible to develop new oil safely or is it even a major environmental problem.

Science is so corrupt in their predictions of environmental causes to support the elites in their profit building activities, a person doesn't know who to believe.

[thomasjordan]

Gwizz:

Do not confuse profit with profit margin.  The profit margin of major oil companies is around 8% - 9%, which is much lower than most Fortune 100 Companies, and most small businesses.  Oil companies make their profit by selling lots of their product.  As worldwide demand increases, more of the product is sold.

Around 2000, when gasoline first hit $3.00 per gallon in Chicago, ABC News ran a report detailing the retail cost of gasoline.  It analyzed everything from the cost of getting it out of the ground, transporting it to a refinery, refining it, transporting it to your local gas station, the operating cost of the local gas station, and finally the how much cost and profit was involved in each phase. 

The big winner was the state and the federal government.  Neither of them contributed anything to the production of gasoline, but their gasoline taxes were the single highest components of the cost of gasoline.  The local gas station were making around $.05, the oil companies around $.10, the transportation companies around $.10, the federal government around $.18, and state governments around $.30.  It's been 8 years, so I don't remember the chart exactly.  The above figures may not be precise, but they are close.

Speculation is contributing to the high prices, but there is little or nothing Congress can do about that.  The Chicago Mercantile Exchange only requires a 5% deposit for a future's contract.  Of course, if the price declines, that 5% is a loss.  Still, 5% is not a large investment, unless you are talking about millions or billions of dollars.  Of course, Chicago is only one of several commodities exchanges, and as for oil based products, it is no longer the largest.  Congress can regulate it all it wants, and that won't have much effect.  Speculators will just switch to another exchange.

[Hawk]

I don't recall which oil company it was but last report was that they made about $10 million in profit. Sounds like a ridiculous amount, doesn't it?

Let's look at the big picture though. Their gross was about $138 million, which makes their profit a tad over 9%.

Of that gross they paid about $33 million in taxes, and they say the oil company's don't pay enough taxes, and as Gwizz said, you have to look at the difference between profit and profit margin.

There's a lot of deceptive news going on these days. False reports. Incomplete reports. It's all agenda based.

[thomasjordan]

Hawk:

You made a good point.  Those profit figures for the oil companies are AFTER TAX PROFITS.  They have already paid about 35% of their gross profit to the federal government, and state governments may have gotten some also.

[Gwizz]

Thanks again Jorgan.  I always learn something new from your posts, causing me to think and look deeper.

This morning I listened to a liberal station that actually had a delegate debate about oil.  One supported the Republican, McCain and the other Obama the Democrat.  The Republican was continually cut off during his replies, but overall he got his points heard.   

It was said that Exxon Mobile had made over 11 billion dollars in profit over the last 3 months, a record for all corporations in the US, not just oil.  I'm not sure which side said this or even if it is true in the context they stated. They kept talking over each other.  It seems to me the oil companies are taking advantage of a situation and adding to the high price of oil. 

It was also stated that OPEC had a meeting of oil supply nations in about 2005 and agreed to instigate a major raise in the price of oil. The US did not oppose this. 

The US also changed the way oil was regulated on the commodity exchange.  This opened up the trading of oil by speculators giving them an easy road to millions in profits. 

It seems to me it wasn't just supply and demand that caused the increased prices; that there was a good deal of manipulating that took place to help cause the increase in the price of fuel. 

PS: I got to thinking about what I was paying for gasoline in 2000.  I found a receipt for Feb. 2001.

.     My cost was $1.42.9.   I wonder if someone in Chicago was manipulating oil prices in 2000.   

[Gwizz]

I did a bit more looking at corporate profits.

Google's profit margin is 55%

There are corporations that have over a 500% profit margin.

Exxon Mobile profit margin is only 10% but because they move so much product, their total profit was greater than any other US corporation over the last three months.

It is hard to visualize Exxon Mobile being so large.

[Hawk]

The drug companies average about a 22% profit. Over twice the percentage of the oil company's. Have you heard any talk of a wind-fall tax on them?  NO!

[Gwizz]

I wonder where Microsoft's profit margin fits in to the grand scale of things.